PrivatBank fined by Latvian Finance and Capital Market Commission

Latvia’s Finance and Capital Market Commission has decided to fine AS PrivatBank EUR 768 653 for violations of the Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing. The bank is also required to fix problems with its existing internal control, as confirmed by FKTK representatives.
After inspections performed in 2020 FKTK concluded PrivatBank needs to improve its internal management and internal control system, as well as improve and adopt and appropriate risk management culture.
FKTK also performed an assessment of bank officials’ responsibility for the violations uncovered in the inspection.
As a result, FKTK issued a warning to PrivatBank board member and ex-interim chairman of the board Inga Rumba.
The bank had this to say about FKTK’s decision: «In an effort to improve the internal control system, as of September 2021 PrivatBank has implemented 90% of recommendations previously presented by external and internal auditors. Nevertheless, rapid changes in the financial sector require constant improvements and considerable investments.»
«We take NILLTPFN very seriously. This is why we will review and add improvements to the bank’s operations, as well as invest in innovative solutions. To integrate the most effective risk management mechanism in accordance with good practice standards, we invest in IT solutions and employee skills. We strive to keep increasing the number of CAMS certificate holders in the bank. At the same time, we can say we have commenced talks with potential investors. This will help develop profitable services and the bank as a whole in the future,» says PrivatBank management, adding that they respect FKTK’s decision.
PrivatBank reports that several years ago the institution had performed a review of clients, dropping all high-risk clients. «In-depth client evaluation became a focus in business and client-related operations. The bank continues adding improvements and performing measures necessary for sustainable business model.»
FKTK found in its inspection that because of an inappropriate risk management culture PrivatBank still has not yet created an appropriate control system that would ensure compliance with NILLTPF and related regulations. FKTK notes that the bank needs to ensure an independent client evaluation, monitoring and internal control system that meets the bank’s business model, clients category and risk levels.
The bank is also required to hire a sworn auditor or audit company to perform an independent evaluation of the bank’s internal control system and its compliance with requirements of NILLTPF. FKTK will carefully follow the bank’s activities in this area.
In 2020 FKTK adopted a new approach for inspections. During inspections FKTK evaluates 10 elements of bank’s internal control systems: NILLTPF risk profile and NILLTPF and sanction risk assessment, risk management strategy, structure, employee duties and qualifications, their training, client evaluation and business deal monitoring, discovery of suspicious deals and their reporting to the Office for Prevention of Laundering of Proceeds Derived from Criminal Activity, reporting of suspicious deals and sanction violations to FKTK, NILLTPF risk management IT technologies, audit capabilities, anonymous reporting options and general internal regulations.
In the first half-year of 2021 Latvian PrivatBank operated with losses worth EUR 3.524 million, which is 24.4% more when compared to the same period of 2020, according to the bank’s financial account.
Asset-wise PrivatBank is one of the smallest banks in Latvia. Its largest shareholder is Ukraine’s PrivatBank (46.54%), which was nationalized by the Ukrainian government in December 2016.